Chapter Ǵ: Why Subjectivism? ȂȀprecisely equal minus” (quoted in ShandȀȈȇȃ, p.Ȁȁǿ). Ļey recognize that
wealth is produced not only by physically shaping things or growing them
but also by exchanging them. In the words of Henry George (ȀȇȈȇ/ȀȈȃȀ,
pp.ȂȂȀ–ȂȂȁ), who independently achieved several Austrian insights, “Each
of the two parties to an exchange ... [gets] something that is more valuable
to him than what he gives.... Ļus there is in the transaction an actual
increase in the sum of wealth, an actual production of wealth.”
Subjectivists recognize nonmaterial elements in costs as well as de-
mands. Every price is determined by many circumstances classifiable
under the headings of “subjective factors” and “objective factors” (or
“wants” and “resources and technology”). An alternative classification dis-
tinguishes between demand factors and supply factors. Ļis alternative is
not equivalent to the first classification because there is no reason to sup-
pose that subjective factors operate only on the demand side of a market
while objective factors dominate the supply side.
On the contrary, subjective factors operate on both sides. Ļe supply
schedule of a good does not reflect merely the quantities of inputs tech-
nologically required for various amounts of output, together with given
prices of the inputs. Ļe input prices are themselves variables determined
by bidding among various firms and lines of production in the light of the
inputs’ capabilities to contribute to producing goods valued by consumers.
Consumers’ subjective feelings about other goods thus enter into deter-
mining the money costs of supplying quantities of any particular product.
Subjective factors operate in both blades of Marshall’s scissors. (Mis-
leadingly, MarshallȀȈȁǿ/ȀȈȃȆ, pp.Ȃȃȇ,ȇȀȂff., had referred to a utility blade
and a cost blade, as if utility and cost were quite distinct.)
By the logic of a price system, then, money cost brings to the attention
of persons deciding on production processes and output volumes in any
particular line—and ultimately to the attention of its consumers—what
conditions prevail in all other sectors of the economy, including persons’
attitudes toward goods and employments. Money prices and costs convey
information about subjective conditions outside the direct ken of particu-
lar decisionmakers.
At this point the subjectivism of Austrian economists reinforces their
awareness of general economic interdependence and their concern with
coordination among the plans and actions of different people. Ļey are
wary (as many textbook writers seem not to be) of focusing so narrowly
on the choices of the individual household and individual firm as to detract
attention from the big picture.